Business Aviation Market Overview – December 2022

The number of pre-owned sales have been staggering over the last few years. As the selection of used aircraft becomes more constrained, even older ‘hangar queens’ got their 15 minutes of fame during this flurry of sales and transactions.

In fact, even aircraft that made their first appearance back when the Beatles made their own debut, on the US’s Ed Sullivan black and white television show back in the mid-1960s, were selling.

Looking back over the period from when the pre-owned sales surge began in the 2017 timeframe to today, it’s surprising to note some of the vintage business aircraft that were transacted during the timeframe. While it’s not always clear whether these ships were airworthy or ever expected to fly again, it nonetheless shows there was a market with willing buyers.

Admittedly, some may have been bought and sold for maintenance training or display with no plan to re-enter flight status. Others may simply have been paperwork formalities required to write-off and part-out an aircraft. Regardless, it’s still interesting to identify the more unusual aircraft that recently transacted on the pre-owned aircraft market other than the everyday ‘meat and potato’ Challengers, Hawkers and Citations.

Old Jet Transactions

Let’s start with the venerable Learjet 23 (pictured above, photo courtesy of Smithsonian Institution) which was that company’s first model, introduced in 1964, helping to create the business jet segment. Between 2017 and today there were three such transactions. Serial number 82A (with an asking price of $95,000) featured a drag chute and was sold in 2020. Under the maintenance heading, it was noted that the A, B, C, D and 12-month inspections were due.

Serial number 36 was apparently purchased by the same buyer, and boasted a cargo door, while the third, Serial number 84, was bought by what appears to have been an air museum. Cessna Citations didn’t arrive to the party until the early 1970s. Surprisingly though, even the earliest articles are still selling despite their pedigree going back to the days of leisure suits, lava lamps and beanbag chairs.

Over the same period covering 2017 through today, over 100 units changed hands (some multiple times). Synthetic vision and head-up displays move over – some of these babies were instead decked out with a beige/taupe interior with burgundy carpet and 8-track stereo.

A Beechcraft Starship transacted in 2017, which is indeed rare as there are only five of them listed as in-service worldwide. In the conservative business aircraft industry, it may have been a little ahead of its time with its pusher-prop configuration, canards and early use of carbon fiber composites.

Designed to be the successor to the King Air series, only 53 were built before the line was discontinued primarily for reasons related to market, performance, and cost. Beechcraft attempted to purchase back all examples to destroy them rather than being on the hook to continue providing parts for a limited fleet. Still, a handful managed to survive.

A pair of Gulfstream GIs built in 1961 and 1969 also became part of the paper chase. Despite being from the Cold War era, one brandished an Iridium SATCOM that would have made Walt Disney, one of the earliest users of the GI for business, very envious had there been communications satellites back then.

Other notable resale retail transactions included a 1992-model Fokker 50, an original 1969 Falcon 20D, a 1974 Sabreliner 40A, and even a 1969 Boeing 727-100.

Beauty is in the eye of the beholder, but when pre-owned supply dips to just 4.7% of the fleet it can be time to reconsider..

Pssst... Anyone want to buy a Hansa Jet or MS 760 Paris Jet...?

MI www.brifo.com

Global BizAv Flight Activity Trends

Flight activity ebbed during October Year-over-Year (YoY), according to WingX Advance. In Europe, economic turbulence clearly dented bizjet demand, while in the US, charter demand showed signs of fraying from its post-Covid peaks...

As of the end of October, Year-to-Date (YTD) global business jet and turboprop flights remained 13% ahead of the preceding year, and 14% above the comparable period three years ago. However, bizjet and turboprop sectors were down 1% in October 2022 versus October 2021.

North America

Year-to-Date, business jets flew 15% more than in the same period for 2021. In October specifically, North American flight activity was 1% down compared to October 2021, but remained 15% above 2019 (pre-Covid).

Private flight departments drove the growth in the region throughout October, with Part 91 flights up 12% up on last year, and 23% above pre-pandemic October 2019. Conversely, Charter (Part 135) and Fractional (Part 91k) operators experienced a slowing in demand.

Branded Charter operators flew 37,000 sectors in October 2022, 19% fewer than the all-time high recorded in October 2021, but still up 17% versus October 2019. Fractional operations were up 1% over October 2021, and up 33% on October 2019.

Europe

Of the Business jet sectors flown from January through October 31, 2022 were 15% above the same timeframe in 2021, and 17% ahead of 2019. However, the YTD figures mask some significant declines in the last two months...

Business jet sectors for October were down 17% versus October 2021 but retained a 9% increase compared to 2019. Aircraft management and branded charter fleets saw the biggest drop in operations during October, with flights down 25% compared to October 2021. Meanwhile, aircraft management and corporate flight department fleets were down 3% on October 2019.

Sweden was the only leading European bizjet market to see an increase in October 2022 activity compared to October 2021. All other major markets saw declines in activity YoY, and Austria even saw flight activity dip below October 2019 levels. YTD, Greece was the only top 10 market to have seen a reduction in flight activity versus 2021.

Rest of the World

Business jet usage outside of North America and Europe continued to run ‘hot’ during October. Year to date activity was 21% above the comparable period in 2021, and 53% above activity levels three years ago.

October 2022 ended with just over 21,000 business jet flights, 16% more than last year, and 51% above 2019.

• Middle East activity was 2% above 2021
• Africa was up 11%
• South America was up 5%, and
• Asia was up 19%.

In China, YTD activity is approximately half of that registered last year, and down 39% compared to 2019.

MI www.wingx-advance.com

In-Service Aircraft Maintenance Condition & Marketability

With a 10.4% increase (92 aircraft), Asset Insight’s tracked 134- model business jet and turboprop fleet posted its seventh consecutive inventory rise in October, with all four groups reflecting the availability increase...

Year-to-Date (YTD) listings were 10.1% higher (89 units) but remain 42.1% below the June 2020 ‘inventory for sale’ peak. Overall availability of the active fleet has now risen to 4.3%, compared to 5.7% in October 2021.

Aircraft Values

The tracked fleet’s average Ask Price increased for the sixth consecutive month, and the 11.5% increase was also the sixth consecutive 12-month high figure. In fact, it was just $11k shy of the all-time high figure, with October’s increase equating to +57.9% Year-over-Year (YoY), and +79% YTD.

It appears the pandemic-related aircraft buying hysteria has morphed into the annual fourth quarter (Q4) purchasing frenzy, with bonus depreciation providing a very able assist to US-based taxpayers’ logic.

Inventory Fleet Maintenance Condition

The latest available fleet mix positively impacted the Quality Rating and Maintenance Exposure figures, as higher quality assets continue to replace aircraft departing the inventory.

Quality Rating: At 5.323, October’s Quality Rating posted the best/highest figure since April’s 5.347 12-month high, and represented a 0.4% improvement over September’s 5.303, on Asset Insight’s scale of -2.5 (low) to 10 (high). The Rating pushed listed aircraft further into the ‘Excellent’ range, was 2.4% better/higher YoY, and indicates fewer maintenance events due in the near term.

Maintenance Exposure: While improving/decreasing by 0.3% for the month, thereby signaling the cost of embedded/accrued maintenance for the currently listed fleet will be a bit less expensive to complete, Maintenance Exposure will be 4.6% higher YoY.

Maintenance Exposure to Ask Price (ETP) Ratio

The listed fleet’s ETP Ratio has improved/decreased for six consecutive months and has also set a 12-month best/low figure during the past five months. In October, it improved/decreased to 50.7% from September’s 52.7%, which was not a surprise based on the slight decrease in Maintenance Exposure and the 12-month high average Ask Price.

As previously discussed here, the ETP Ratio is a useful indicator of an aircraft’s marketability. It is computed by dividing the asset's Maintenance Exposure (the financial liability accrued with respect to future scheduled maintenance events) by its Ask Price. ‘Days on Market’ (DoM) analysis has shown that when the ETP Ratio is greater than 40%, a listed aircraft’s time on the market increases, usually by more than 30%.

Assets whose ETP Ratio was 40% or higher during Q3 2022 were listed for sale nearly 89% longer on average than aircraft whose Ratio was below 40% (331 versus 175 Days on Market). In October, nearly 35% of Asset Insight’s tracked models, and 38% of the listed fleet, posted an ETP Ratio above the 40% mark considered to be ‘excessive.’

Market Summary

The mind-bending, if not irrational, relationship between rising Ask Prices while supply continues to increase is due to two factors:

• Continued strong buyer demand, and
• Sellers hoping to capitalize on it.

One possible impediment to either side achieving its goal may well be supply chain issues, specifically access to an accredited service facility capable of completing required technical work by December 31, 2022.

Entities wishing to secure the 100% bonus depreciation available under US tax law should, at this juncture, be well on their way to finalizing a transaction. If not, the window to establish the necessary team of experienced professionals, even if they have identified their preferred aircraft, is rapidly closing.

While not anticipating as many transactions to close this year as in 2021, Q4 sales are expected to be very high.

Large Jets: Inventory increased 19.3% (41 units) for Asset Insight’s 43-model tracked Large Jet fleet, and availability is now up nearly 51% YTD (85 units), but remains 32.5% below the June 2020 peak.

The group’s Quality Rating improved/rose slightly during the month (0.1%), contributing to a 3.5% improvement YoY. October’s 5.637 Rating was, once again, better than the 12-month average, propelling the group further into ‘Outstanding’ territory. 

Maintenance Exposure remained unchanged in October and YoY, while more-or-less reflecting the 12-month average. Ask Price rose for the third consecutive month, and October’s 8.3% increase generated the highest value since April. The Large Jet average Ask Price has now increased 45.4% YTD, and 59.4% YoY.

While Maintenance Exposure did not change, the Ask Price increase was sufficient to lower the ETP Ratio to 36.6%. For seven of this year’s ten months, the ETP Ratio for Large Jets has been better than/below the 40% mark that statistics have shown negatively impacts aircraft marketability.

Mid-Size Jets: Availability grew by 14% in October (34 units), increasing inventory for Asset Insight’s 45-model tracked Mid-Size Jet fleet by 19.9% YTD, and leaving it 44.8% below the June 2020 peak.

The group’s Quality Rating rose/improved 2.9% to 5.404 in October, a 12-month high figure that also reflected a 2.1% improvement YoY. The Rating moved the group deeper into the ‘Excellent’ range. Maintenance Exposure improved/decreased 3.1% to a better-than-average figure for October, but that also reflected a 7.8% YoY increase to the cost of upcoming scheduled maintenance events.

The average Ask Price increased 3.3% for October, and the group’s figure was up 66.5% YoY and an astounding 148.2% YTD. The net effect of the Maintenance Exposure decrease and Ask Price increase on the ETP Ratio was an improvement to 48.8%, representing a 12-month best/low figure.

Considering February’s 83.3% Ratio, the subsequent decrease should be making sellers of Mid-Size Jets happy.

Light Jets: Listed assets for the 29-model tracked Light Jet fleet increased 4.2% in October (11 units), bringing the YTD figure 2.5% above the year-end level. Availability stood at 49.5% below the June 2020 peak.

The Quality Rating worsened/decreased 2.3% in October but was still about 1% improved YoY. At 5.140, the figure relegated Light Jets back into ‘Very Good’ territory following September’s ‘Excellent’ Rating. Maintenance Exposure worsened/rose 2.1%, contributing to nearly a 3% increase YoY.

The average Ask Price reflected the decrease in available Light Jets’ condition, falling 6.2% in October. However, that still left the group’s pricing up 66.7% YoY and 79.8% YTD. As one would expect, the ETP Ratio rose/worsened to 75.5%, after posting consecutive 12-month low figures during the previous three months.

Turboprops: The number of Turboprops listed for sale increased 3.7% in October (six units) but remained 22% lower YTD and 55.8% down since June 2020.

The Quality Rating posted another slight improvement to 5.111 for October, a rise of 0.8% keeping the group within ‘Very Good’ range, but the Rating was also 2.7% better on a YoY basis.

Maintenance Exposure remained unchanged, slightly better than the 12-month average, but improved/decreased 5.6% YoY. Ask Price has been rising every month since February, and October’s 6.7% increase represented the group’s fourth consecutive monthly all-time high figure. Turboprop pricing has now increased 39.2% YoY and 42.8% YTD.

The stable Maintenance Exposure figure and Ask Price increase favorably impacted the ETP Ratio, lowering it to 34.9%, a 12-month low/best Ratio, and only slightly higher than the group’s all-time low of 32%.

It was also the group’s sixth consecutive monthly ETP Ratio below the 40% ‘excessive’ demarcation point, and the fourth consecutive month that Turboprop marketability has exceeded that of Large Jets.

While all four groups improved in October, the 17-model tracked Turboprop fleet continued to offer the largest per-model aircraft selection (9.7 units), followed by Light Jets (9.3), Mid-Size Jets (6.3), and Large Jets (5.8).

MI www.assetinsight.com

Read the concluding article New Airplane Shipments Trends in Q3 2022 - Analysis by Mike Potts